This content is from: Portfolio

Daily Agenda: Europe Losing Patience with Greece

Oil prices slide in advance of new data; Bank of New York Mellon reaches settlement with regulators; Putin pushes for new regional currency.

The Greek government has agreed to provide European Union leadership with an overview of proposed reforms as the nation seeks an extension on existing loans. With a significant shortfall in tax revenues for 2014 and no access to bond markets or ECB emergency facilities, the Mediterranean country is simply running out of funds. With money increasingly flowing from the country ahead of possible default or capital controls, the situation in the private sector is nearly as dire as that of the public sector. Investors find themselves in a similar position to EU leaders in that they are each losing patience with the seemingly never-ending negotiations. While the so-called Grexit, a Greek exit from the euro, is a worst-case scenario, many may simply welcome the closure. With ECB bond buying buoying market confidence and U.S. dollar strength driven by forces far from Athens, the ongoing drama appears increasingly less high on the list of investors’ macro concerns.

Bank of New York announces settlement. Bank of New York Mellon has reached a $714 million dollar settlement with federal and New York state and authorities over currency market manipulation. An earlier settlement with the State of Virginia over the same practices resulted in one of the first major payouts to a whistleblower under legislation adopted following the 2008–’09 financial crisis.

Oil rig count to be released. Houston–headquartered oil field services company Baker Hughes will release data on U.S. oil rigs in production today. Forecasts are for another contraction, as inventories remain at post–World War II highs. Oil futures traded lower in London and New York this morning in advance of the report, as did Nymex gasoline contracts as refinery strike jitters exit the distillate markets.

Russian sanctions renewed. At the end of the Eurogroup gathering in Brussels today, European Commission President Donald Tusk announced an agreement to extend economic sanctions against Russia through the end of the year. The proposal will be formalized by a vote in June.

Putin calls for a new currency. During a meeting in Astana, Kazakhstan today of the Eurasian Economic Union, a group of four former Soviet Union nations in the Caucasus and Central Asia, Russian President Vladimir Putin floated the concept of a unified currency for the region to compete with the euro. The Kremlin has instructed the Bank of Russia to unveil a formal proposal by September for integrating the currencies of the bloc. Presently the EEU includes four countries: Armenia, Belarus, Kazakhstan and Russia; Kyrgyzstan is an acceding member.

Portfolio Perspective: Is the New Economy to Blame for a Lack of Wage Growth?James Frischling, NewOak

The U.S. economy has added private-sector jobs for 60 straight months, during which time 12 million jobs have been created. While the unemployment rate has fallen to 5.5 percent, limited wage growth has been singled out as the main reason for the anemic recovery and the widening of wealth inequality. So what’s holding back wages? It might not be what you think.

Reasons for the lack of wage growth, despite consistent job creation, can be attributed to a myriad of factors. We hear about the skills gap, poor education and training, misguided politicians, the dismantling of unions and corporate greed as among the reasons holding back wage improvement. But while our economy is creating jobs, is it also fostering such significant competition among workers that corporations and consumers are the beneficiaries but not the worker or employee?

Perhaps it’s because at the heart of our “new new” economy, we’ve firmly established a new employment classification: the permanent temporary employee (PTE). Consistent with the PTE, we’ve also witnessed a spike in freelancers, which is a variation of the independents. PTEs, freelancers and independents are afforded more flexibility in both hours worked, as well as the types of projects and clients they take on, but the pay-for-services model focuses on efficient use of hours and the cost of those hours.

Add to this mix the Uber-effect, also known as the on-demand economy. When you take into perspective not just the picture of how consumers are benefitting by forcing so many businesses, professionals and service providers to compete on the open market, but also the picture of how it’s impacting wages by making access to services and price transparency so readily available, the reasons behind the lack of wage growth become a lot clearer.

Wall Street and Main Street, while often pulling in the same direction, are often times at odds. When companies are forced to compete on price, the consumer wins. When wages remain stagnant, however, eventually the consumer loses too.

James Frischling is president of New York–headquartered financial advisory and consulting firm NewOak.

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